Canadian dollar posts a 3-week high as US currency retreats

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar edged up to a near three-week high against its U.S. counterpart on Monday as risk sentiment improved and ahead of monthly GDP data this week that could offer clues on the strength of the domestic economy.

The loonie was trading 0.1% higher at 1.3656 to the U.S. dollar, or 73.23 U.S. cents, after earlier touching its strongest level since April 10 at 1.3632.

"It has been a somewhat quiet start to the week, with firmer equity and bond markets underpinning risk sentiment and weighing on the USD more broadly," said George Davis, chief technical strategist at RBC Capital Markets.

The U.S. dollar lost ground against a basket of major currencies as the yen rose sharply following possible intervention by Japanese authorities, while Wall Street's main indexes crept higher and U.S. Treasury yields eased for a second straight day.

Investors were awaiting a Federal Reserve interest rate decision, due on Wednesday, as well as Tuesday's Canadian GDP data. Economists expect that Canada's economy grew 0.3% month-over-month in February, after advancing 0.6% in January.

Speculators have reduced their bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of April 23, net short positions had decreased to 76,450 contracts after hitting 82,815 in the prior week, the highest level in nearly seven years.

The price of oil, one of Canada's major exports, fell as Israel-Hamas ceasefire talks in Cairo tempered fears of a wider Middle East conflict. U.S. crude oil futures were down 1.7% higher at $82.45 a barrel.

Canadian government bond yields eased across the curve, tracking moves in U.S. Treasuries. The 10-year was down 5.9 basis points at 3.767%, after touching on Thursday a near six-month high at 3.891%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)